David B. Fein, United States Attorney for the District of Connecticut, and Kimberly K. Mertz, Special Agent in Charge of the New Haven Division of the Federal Bureau of Investigation, today announced that Garret L. “Denny” Denniston, 62, of Boothbay Harbor, Maine, and formerly of Sandy Hook, Conn., has been charged by criminal complaint with operating a scheme to defraud multiple investors out of approximately $1 million.
Denniston was arrested today at his Maine residence. He appeared before United States Magistrate Judge John H. Rich III in Portland, Maine, and is being detained pending a hearing on Monday, September 24, 2012. “As alleged, this defendant operated an investment fraud scheme by representing to investors that he ran a successful investment business and could offer them a special ‘friends and family’ deal investing in companies for a guaranteed return of their investment plus a high rate of interest,” stated U.S. Attorney Fein. “I urge the investing public to view with suspicion promises of guaranteed returns. I commend the FBI for shutting down this alleged scheme, and I thank the U.S. Attorney’s Office for the District of Maine for their invaluable assistance. The investigation is ongoing, and I encourage any potential victims or anyone with information related to this scheme to contact law enforcement.”
Citizens with information that may be helpful to the investigation are encouraged to contact FBI Special Agent David J. Ford at (203) 382-6645. As alleged in the criminal complaint, Denniston ran an investment fraud scheme through ConsensusOne, LLC and other Consensus companies. Denniston defrauded two victims out of $300,000, another two victims out of $400,000 and a fifth victim out of more than $200,000.
As part of the scheme, Denniston represented that he ran an investment business specializing in mergers and acquisitions. He solicited money from his investors principally by telling them that their money would be used to invest in companies through the purchase of stock options (or promissory notes) convertible into the company’s stock at a substantial discount to the value of the stock on the date of conversion.
In order to induce people to make the investments, Denniston represented that the companies were on the verge of being sold or had already been sold in deals that were closing on an accelerated schedule. Denniston indicated that the investment was refundable if the deal did not close and that his company would guarantee the investments, as would he personally, such that the investments were without risk.
Denniston also told people that the investment was being offered to them as part of a “friends and family” deal pursuant to which he had access to a limited pool of stock options that would yield a guaranteed return on investment.
Denniston spent a substantial portion of the money that he was given on his personal expenses rather than investing it in accordance with his representations to investors.
The criminal complaint charges Denniston with wire fraud, a charge that carries a maximum term of imprisonment of 20 years.
U.S. Attorney Fein stressed that a complaint is only a charge and is not evidence of guilt. The defendant is entitled to have this matter presented to a grand jury and, in the event an indictment is returned, he is entitled to a trial at which it will be the Government’s burden to prove guilt beyond a reasonable doubt.
This matter is being investigated by the Federal Bureau of Investigation. The case is being prosecuted by Special Assistant U.S. Attorney Kerry L. Quinn, with assistance from the U.S. Attorney’s Office for the District of Maine.
In December 2010, the U.S. Attorney’s Office and several law enforcement and regulatory partners announced the formation of the Connecticut Securities, Commodities and Investor Fraud Task Force, which is investigating matters relating to insider trading, market manipulation, Ponzi schemes, investor fraud, financial statement fraud, violations of the Foreign Corrupt Practices Act, and embezzlement. The Task Force includes representatives from the U.S. Attorney’s Office; Federal Bureau of Investigation; Internal Revenue Service – Criminal Investigation; U.S. Secret Service; U.S. Postal Inspection Service; U.S. Department of Justice’s Criminal Division, Fraud Section and Antitrust Division; U.S. Securities and Exchange Commission (SEC); U.S. Commodity Futures Trading Commission (CFTC); Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP); Office of the Chief State’s Attorney; State of Connecticut Department of Banking; Greenwich Police Department and Stamford Police Department.
Citizens are encouraged to report any financial fraud schemes by calling, toll free,855-236-9740, or by sending an email to email@example.com.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations.
Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants.
To report financial fraud crimes, and to learn more about the President’s Financial Fraud Enforcement Task Force, please visit www.stopfraud.gov.
On October 1, 2012, the U.S. Department of Justice and the Securities and Exchange Commission are hosting the Northeast Region Investor Fraud Conference. The conference, at the University of Connecticut – Stamford Campus from 9:00 a.m. to 1:00 p.m., is open to members of the community, law enforcement, victim advocates and others interested in detecting and combating an unprecedented rise in Ponzi and other investment fraud schemes that involve thousands of victims and billions of dollars of losses. Conference participants include U.S. Attorneys from Connecticut, Massachusetts, New Jersey, and New York, as well as senior officials from the SEC, FBI, CFTC and other financial fraud enforcement and regulatory agencies. Individuals interested in attending the conference are encouraged to contact Lori Vernali at Lori.Vernali@usdoj.gov or860-760-7959.